Knocking on ASEAN’s door

As ASEAN becomes an economic powerhouse, attracting local and foreign investment, its increasingly urgent that more Australian companies get a foot into the massive regional opportunity.

This year marks the 50^th anniversary of the Association of Southeast Asian Nations (ASEAN) – the 10 countries comprised of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The 7^th largest economy in the world, ASEAN had an annual growth rate of 5% over the last 10 years. Forecasts are that ASEAN’s economy will be the 4^th largest by 2050, with mass urbanisation of over 90 million people and a consumer class of 160 million households by 2030.

ASEAN is undergoing one of the most ambitious regional integration journeys in history with the launch of the ASEAN Economic Community (AEC). Achieving the objective of creating a single integrated market and production base across ASEAN will be a long and challenging road given the diversity across the region. Progress is being made in removing tariffs and commencing some trade and investment liberalisation and facilitation. Non-tariff measures are growing, though, and must be addressed to achieve the full potential of the AEC as internal integration in the AEC directly benefits ASEAN based businesses only.

Global economies are flocking to ASEAN, with extra-ASEAN trade accounting for 8% of global exports and ASEAN attracting around 5% of global FDI. Intra-ASEAN trade has tripled to 25% of total ASEAN trade as local companies back the ASEAN promise. By comparison, Australia’s investment in ASEAN is around the same level as its FDI in New Zealand, even though ASEAN’s GDP of US$2.5 trillion and population of 620 million far exceeds New Zealand’s GDP of US$180 billion and population of 4.6 million.

Australia’s global competitiveness has slipped to its lowest ever ranking of 22^nd in the world. Australian businesses are fighting for an increasingly costly slice of the national pie, and overlooking neighbouring ASEAN as unknown and risky compared to Australia’s traditional trading partners.

Australian businesses no longer have the luxury of waiting. Local and foreign businesses in ASEAN of all sizes in a diverse range of sectors are demonstrating that successful business can be done and entrenching themselves in markets and value chains across the region. One of the best investments that an export ready Australian enterprise can make is to spend time on the ground in ASEAN.

Much can be said about doing business in ASEAN. Some of the most common advice that we give Australian companies includes:

1. Relationship building. The value of relationships in ASEAN cannot be understated. An effective way of doing this is through networking, sharing expertise and collaboration opportunities – whether formally or informally. Face-to face engagement, deep listening for needs and motivation is vital to successful relationship building with ASEAN business networks.
2. Build depth of ASEAN capability. Success in ASEAN requires commitment, understanding and persistence all levels because of its difference to traditional Australian markets. Building the capability of key staff (whether executive decision-makers or front-line team) to understand ‘the ASEAN way’ enables the company to better capitalise on opportunities and address risk.
3. Seize opportunity in diversity. The lack of homogeneity across ASEAN can be a challenge. It can also be an opportunity as there are demands in every sector and opportunity to build or connect to supply chains across markets. Australian businesses will need to be nimble in adapting their products or business models to suit.

Australian businesses must start knocking on ASEAN’s door now and building a presence there. Their competitors certainly are.